The only insight I seem to find is some speculation that market traders are pricing in the additional risk of a slight delay in Treasury payments due to the debt ceiling negotiations. Any other theories on why the rate is so high this week (compared to 3.905% in last week's auction)?
Answers
Thanks so much for this link. Great content and very thought provoking.
I have a few reactions to the article.
- The graph of 1-month vs. 2-month yields is very informative.....and quite dramatic.
- Even more informative is the analysis of how oversubscribed the 1-month T-bill auction was and the fact that "$76 billion in tenders had rates of over 5.84%." My interpretation of this is that the "smart money" Primary Dealers are pretty convinced there will be a default of some sort in early June.
- On the other hand, since the 2-month bill yield is behaving more normally, my interpretation is that the Primary Dealers are not yet concerned about a default risk for bill maturities longer than 1-month.
- I agree with one of the comments made on the article that "No major media organization is even mentioning this." And, this includes the major financial media. Why would that be? I find this odd.
- A second comment points out the fact that this upcoming week's 4-week bill auction is a "reopening" of an existing T-bill and, in the commenter's opinion, "last Thursday’s shockingly high auction yield of 4-week T-Bills (due June 6) will probably recur in this week’s 4-week T-Bill auction, given that the secondary market is currently pricing the T-Bill due June 13 at 5.45% bid – 5.33% ask."
- In summary, I will be keeping an eye on the secondary market action this week for the T-bill maturing June 13 and, potentially, consider buying this in the secondary market or participating in this Thursday's auction.
- I would be interested in other reactions to the article provided by MAKNYC as I learn a ton from all of you.
I think Janet Yellen and the FED are most concerned, not about the temporary timing default, but the messaging and unintended consequences if they are forced to do something to counter congresses ineptitude. It now opens another can of worms where markets fully expect such ongoing support in the future. And it will. And once politicians come to understand this, even the ones that still use AOL for email, I think that removes their urgency in formulating a political compromise, now and in the future.
As of 5/4/23 at 10:20PST, on Vanguard's site, I currently see a few options for a 4 Week T Bill.
Yields range from 5.261% to 5.356% with maturities from 06/16/2023 to 06/13/2023.
Looking at secondary market, I see the highest offering for a 4 Week T Bill to be...
CUSIP: 912797FM4 at 5.552% maturing on 06/06/2023.
So, where are you seeing 5.9% yields? Is this not available at Vanguard?
Thanks
The Treasury posts the results from their auctions on TreasuryDirect. Here is the link to the 20 most recent auction results. The CUSIP you cited is the one that auctioned earlier today and the rates you are seeing are in the secondary market vs. the auction rate cited in the link below. Hope this helps.
https://treasurydirect.gov/auctions/announcements-data-results/
https://www.treasurydirect.gov/instit/annceresult/press/preanre/2023/R_20230504_1.pdf
Is there sound Investment strategy of converting %0.454212 /28 days into 5.964% Annual Yield of the Investment?
Fidelity's treasury only MMF has cratered in recent weeks so i figured this would a good place to park my remaining funds every 4 weeks.
For what it’s worth, I’ve temporarily stopped rolling 4-week T-bills until the debt ceiling issue is clearly resolved. It's hard to imagine the government just defaulting on a T-bill, so it's almost certainly a matter of "when" not "if" you'll get your money back. And maybe everything will get equally badly impacted in the event of an actual default, so T-bills are the least bad option. But still just too much uncertainty and not enough of a yield premium for me at this point to stay in individual 4-week T-bills.
Tomorrows auction might receive a bump up in non-competitive bids due to the press received from last weeks auction. Generally non-competitive bids are irrelevant in determining auction yields, but it’s theoretically possible these ‘buy at any price’ orders could squeeze out more of the institutional interest which would generally be the yield determinant. I still doubt it….just possible.
